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ACCA Applied Knowledge · Financial Accounting · Sales and purchases

Marlow Co uses the periodic method. Opening inventory was $30,000, purchases $210,000, carriage inwards $6,000, carriage outwards $8,000, purchase returns $10,000 and closing inventory $40,000. What is cost of sales?

Cost of sales is $196,000: opening inventory plus purchases and carriage inwards, less purchase returns and closing inventory. Carriage outwards is a distribution expense and is excluded from cost of sales.

  1. A$196,000Correct
  2. B$194,000
  3. C$206,000
  4. D$204,000

Explanation

Cost of sales = opening inventory 30,000 + purchases 210,000 + carriage inwards 6,000 - returns 10,000 - closing inventory 40,000 = $196,000. Carriage outwards is a distribution cost, not cost of sales. Including it gives $204,000. Omitting carriage inwards gives $190,000.

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